Bankers know that whatever the tax collector does not take will be left available to pay interest to lenders. Developers bid against each other with regard to the size of the mortgage they will pay the lender, and hence the volume of mortgage debt service they will pay their banker out of rent. This bidding normally continues up to the point where all the available net rental income over costs is paid in the form of interest.

Mortgage lending commonly provides from 80 to 100 percent of the property’s purchase price (or even more as seen in the bubble Economy’s years leading up to the September 2008 crash). This is a highly leveraged rate—it has a high debt/equity ratio. This kind of mortgage debt pyramiding provided the model for junk-bond financing used by corporate raiders in the 1980s, and for the flood of public assets being privatized in Britain, continental Europe and Third World countries. The distinguishing feature of such purchases of real estate, corporations or public entities already in place is that new loans are attached without creating new tangible investment. Instead of new tangible-capital formation there is more typically a downsizing and carve-up as revenue is used to pay interest and amortization up to the maximum extent available over and above operating costs.

The fact is “post-industrial” practice made this dynamic quite different from that which optimists envisioned at the outset of the Industrial Revolution. Instead of mobilizing savings to fund new means of production, today’s banking system merely is loading the economy’s assets down with debt. What seem to be occurring is functionally akin to the pre-industrial mode of lending. The difference is that pre-industrial usury was dominated by individual family lenders, but the new post-industrial debt system is occurring on a large, corporate scale. It has merged with industry primarily to the extent that the financial sector has gained control of the economy’s manufacturing companies, treating them like real estate to squeeze out as large a rentier income as possible and then sell the companies off for a capital gain.

The economist Michael Hudson talks of the expropriation of pension-fund savings as one of the more innovative methods by which the wage was attacked from the ’60s onwards. Instead of supporting workers and the industries they labour in, these funds – advanced by companies in a trade-off for a slower growth in wages it should be noted – were typically invested for financial gain in stocks and junk bonds as forms of corporate speculation and looting that operated against labour and against ‘productive’ employment and working conditions by siphoning money away from what Hudson terms productive capital formation16. We don’t have to agree with Hudson’s yearning for a ‘good’ productive capitalism under Keynesian conditions, to see that the old idea of the worker as the producer of wealth has taken a knock in the era of the ‘rentier economy’ and conditions of rampant financialisation (even accepting the shift of much labour to the ‘Global South’17). In the context of what we’ve been discussing, how does the financialisation/debt nexus fit with the communisation thesis on the contemporary class relations?

And that’s why yesterday the European Union said, wait a minute, we’re not even going to give you the money to pay us, namely, for us to pay our own banks that have bought your bonds, unless you spell out exactly what you’re going to privatize and commit to it now. And this is a sticking point. In the past, the Greeks have made promises, and thank heavens they haven’t privatized, because once they begin to sell things off, then there’s going to be a real squeeze and even more of an opposition. So you’re right. This is a property grab.

What do Papandreou’s Socialist International colleagues have to say about current events in Greece? I suppose it is clear that the old Socialist International is dead, given the fact that Papandreou is its head, after all. What passes for socialism today is the diametric opposite of the reforms promoted under its name a century ago, in the era prior to World War I. Europe’s Social Democratic and Labour parties today have led the way in privatization, financializing their economies under conditions that have blocked the growth in living standards. The result promises to be an international political realignment.

The problem is that Greece lacks the ready money to redeem its debts and pay the interest charges. The ECB is demanding that it sell off public assets – land, water and sewer systems, ports and other assets in the public domain, and also cut back pensions and other payments to its population. The “bottom 99%” understandably are angry to be informed that the wealthiest layer of the population is largely responsible for the budget shortfall by stashing away a reported €45 billion of funds stashed away in Swiss banks alone. The idea of normal wage-earners being obliged to forfeit their pensions to pay for tax evaders – and for the general un-taxing of wealth since the regime of the colonels – makes most people understandably angry. For the ECB, EU and IMF “troika” to say that whatever the wealthy take, steal or evade paying must be made up by the population at large is not a politically neutral position. It comes down hard on the side of wealth that has been unfairly taken.

Topics covered: Financial and fiscal austerity policies; the appeal of economic austerity to bankers; economic depression and war; post-WWII vs. post-cold war economic policy; government to government grants vs. commercial lending; the euro and dollar; privatization in New Zealand and elsewhere; social unrest; speculation and prices; criminalization of the economy; impoverishment of the US.

Without public investment, how can they become competitive? The traditional path is for mixed economies to provide public infrastructure at cost or at subsidized prices. But if governments “work their way out of debt” by selling off this infrastructure to buyers (on credit whose interest charges are tax-deductible) who erect rent-extracting tollbooths, these economies will fall further behind and be even less able to pay their debts. Arrears will mount up in an exponential compound interest curve.

The EU’s creditor nations and banks are seeking to resolve the crisis in way that will not cost them much money. The best hope, it is argued, given the inability of the crisis countries to depreciate their currencies, is “internal devaluation” (wage austerity) on the Latvian model. Bankers and bondholders are to be paid out of EU/IMF bailout loans

Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary wealth and asset appropriation) simply by financial means?

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971).